SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
Century Properties Fund XIX
(Name of Subject Company)
Century Properties Fund XIX
(Name of Person Filing Statement)
Unit of Limited Partnership Interest
(Title of Class of Securities)
None
(CUSIP Number of Class of Securities)
Martin Lifton
NPI Equity Investments II, Inc.
100 Jericho Quadrangle
Suite 214
Jericho, New York 11753
(516) 822-0022
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) filing Statement)
Copy to:
David J. Heymann
Post & Heymann
100 Jericho Quadrangle
Jericho, New York 11753
(516) 681-3636
<PAGE>
Item 1. Security and Subject Company
The name of the subject partnership is Century Properties Fund
XIX, a California limited partnership (the "Partnership"), and the
address of its principal executive offices is 5665 Northside Drive,
N.W., Suite 370, Atlanta, Georgia 30328. The title of the class of
equity securities to which this Statement relates is Units of
Limited Partnership Interest of the Partnership ("Units").
Item 2. Tender Offer of the Bidder
This Statement relates to the tender offer of DeForest
Ventures I L.P., a Delaware limited partnership (the "Purchaser"),
to purchase up to 43,756 outstanding Units at a purchase price of
$60 per Unit, net to the seller in cash, without interest, pursuant
to the terms and conditions of an Offer to Purchase dated October
17, 1994, and the related Letter of Transmittal (together, the
"Offer"). The Offer is being made pursuant to a tender offer
statement on Schedule 14D-1 dated October 17, 1994.
The address of the executive offices of the Purchaser is 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which
is the person filing this Statement, are set forth in Item 1 above.
(b) DeForest Capital I Corporation, the general partner of
the Purchaser ("DeForest Capital"), is affiliated with NPI Equity
Investments II, Inc., the entity which controls the general partner
of the Partnership (the "General Partner").
Certain Relationships. The General Partner owns a 2% interest
in the Partnership and thus receives, as a continuing interest in
the Partnership, an amount equal to a 2% allocation of the
Partnership's profits and losses, and 2% of distributions. The
General Partner and its affiliates are also entitled to be
reimbursed for certain expenses and to receive fees pursuant to the
terms of the Partnership Agreement. For information as to the
amounts paid to the General Partner and its affiliates during the
last three fiscal years and the six months ended June 30, 1994, see
Note 2 to the Financial Statements of the Partnership in the Form
10-K of the Partnership for the fiscal year ended December 31, 1993
and Note 2 to the Financial Statements of the Partnership in the
Form 10-Q of the Partnership for the six months ended June 30,
1994. For the period from July 1, 1994 through September 30, 1994,
the General Partner and its affiliates received from the
Partnership an aggregate of approximately $184,000 with respect to
the foregoing interests, reimbursements and fees.
<PAGE>
Tender Offer Loan. As disclosed in the Offer, the Purchaser
may obtain a loan in connection with consummation of the Offer.
One of several sources of repayment of such loan is the Purchaser's
distributable portion of the proceeds of any sales or refinancings
of Partnership properties. Consequently, the General Partner may
have a conflict of interest in determining whether and when to sell
and/or refinance the Partnership's properties. In addition,
because the terms of the loan will require a payment by the
Purchaser after a property sale or refinancing by the Partnership
(whether or not the proceeds of such sale or refinancing are
distributed by the Partnership), a conflict of interest may exist
for the General Partner in determining whether and when to cause
the Partnership to distribute any of such proceeds.
Item 4. The Solicitation or Recommendation
Because of the conflict of interest inherent in the fact that
the General Partner is, as described above, an affiliate of the
Purchaser, the Partnership is making no recommendation and is
remaining neutral as to whether Unitholders should tender their
Units pursuant to the Offer.
Item 5. Persons Retained, Employed or to be Compensated
Neither the Partnership nor any person acting on its behalf
has or currently intends to employ, retain or compensate any person
or class of persons to make solicitations or recommendations to
Unitholders on its behalf concerning the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) None
(b) Except for 235 Units beneficially owned by affiliates of
the General Partner, none of which will be tendered in the Offer,
neither the Partnership nor any executive officer, director,
affiliate or subsidiary of the Partnership owns any Units.
Item 7. Certain Negotiations and Transactions by the Subject Company
None.
Item 8. Additional Information to be Furnished
None.
<PAGE>
Item 9. Material to be Filed as Exhibits
The following Exhibits are filed herewith:
Exhibit (a)(i) - Offer to Purchase of the Purchaser dated
October 17, 1994
Exhibit (a)(ii) - Cover Letter to Unitholders from the
Partnership dated October 17, 1994
Exhibit (b) - None
Exhibit (c)(i) - Note 2 to the financial statements of the
Partnership included in the Form 10-K of
the Partnership for the fiscal year ended
December 31, 1993.
Exhibit (c)(ii) - Note 2 to the financial statements of the
Partnership included in the Form 10-Q of
the Partnership for the six months ended
June 30, 1994.
__________
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement
is true, complete and correct.
CENTURY PROPERTIES FUND XIX
By: FOX PARTNERS II, its General Partner
By: FOX CAPITAL MANAGEMENT
CORPORATION, its General Partner
Date: October 17, 1994 By: /s/ Martin Lifton
Martin Lifton, Chairman
<PAGE>
Offer to Purchase for Cash
Up to 43,756 Units of Limited Partnership Interest
of
CENTURY PROPERTIES FUND XIX
at
$60 Net Per Unit
by
DEFOREST VENTURES I L.P.
DeForest Ventures I L.P., a newly-formed Delaware limited partnership
(the "Purchaser"), hereby offers to purchase up to 43,756 of the outstanding
Units of Limited Partnership Interest (the "Units") of Century Properties
Fund XIX, a California limited partnership (the "Partnership"), at a purchase
price of $60 per Unit, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase
(the "Offer to Purchase") and in the related Letter of Transmittal as each
may be supplemented or amended from time to time (which together constitute
the "Offer"). The Offer is made to Unitholders of record as of October 10,
1994. The 43,756 Units sought pursuant to the Offer represent approximately
49% of the Units outstanding as of October 10, 1994.
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 43,756 Units are validly tendered and not withdrawn,
the Purchaser will accept for purchase on a pro rata basis 43,756 Units,
subject to the terms and conditions herein.
A Unitholder must tender all Units owned by such Unitholder in order for
the tender to be valid.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, (i) to extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the
payment for, any Units, (ii) to terminate the Offer and not accept for
payment any Units not theretofore accepted for payment or paid for, (iii)
upon the occurrence of any of the conditions specified in Section 14, to
delay the acceptance for payment of, or payment for, any Units not
theretofore accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the consideration
offered, increasing or decreasing the number of Units being sought, or both).
Notice of any such extension, termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change in compliance with Rule 14d-4(c) under the
Securities Exchange Act of 1934 (the "Exchange Act"). In the case of an
extension of the Offer, such extension will be followed by a press release
or public announcement which will be issued no later than 9:00 a.m., New York
City time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
_____________________________
The Information Agent for the Offer is:
The Herman Group Inc.
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
October 17, 1994
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. Terms of the Offer . . . . . . . . . . . . . . . . . . . 3
Section 2. Proration; Acceptance for Payment and Payment for Units. 3
Section 3. Procedures for Tendering Units . . . . . . . . . . . . . 4
Section 4. Withdrawal Rights. . . . . . . . . . . . . . . . . . . . 5
Section 5. Extension of Tender Period; Termination; Amendment . . . 5
Section 6. Certain Federal Income Tax Consequences. . . . . . . . . 6
Section 7. Effects of the Offer . . . . . . . . . . . . . . . . . . 8
Section 8. Future Plans . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Certain Information Concerning the Partnership . . . . 9
Section 10. Conflicts of Interest and Transactions With Affiliates . 9
Section 11. Certain Information Concerning the Purchaser . . . . . 10
Section 12. Source of Funds. . . . . . . . . . . . . . . . . . . . . 11
Section 13. Background of the Offer. . . . . . . . . . . . . . . . . 13
Section 14. Conditions of the Offer. . . . . . . . . . . . . . . . . 16
Section 15. Certain Legal Matters. . . . . . . . . . . . . . . . . . 17
Section 16. Fees and Expenses. . . . . . . . . . . . . . . . . . . . 18
Section 17. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 18
Schedule 1Information with respect to Directors and Executive
Officers of DeForest Capital
Schedule 2Financial Statements of the Purchaser and DeForest Capital
Schedule 3NPI Partnerships and Fox Subject Partnerships
<PAGE>
To the Holders of Units of
Limited Partnership Interest
of Century Properties Fund XIX
INTRODUCTION
DeForest Ventures I L.P., a newly-formed Delaware limited partnership
(the "Purchaser"), hereby offers to purchase up to 43,756 of the outstanding
Units of Limited Partnership Interest (the "Units") of Century Properties
Fund XIX, a California limited partnership (the "Partnership"), at a purchase
price of $60 per Unit (the "Purchase Price"), net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
this Offer to Purchase (the "Offer to Purchase") and in the related Letter of
Transmittal as each may be supplemented or amended from time to time (which
together constitute the "Offer"). Holders of Units ("Unitholders") who
tender their Units will not be obligated to pay any commissions or partnership
transfer fees, which commissions and fees will be borne by the Purchaser.
The Purchaser will also pay all charges and expenses of The Herman
Group, Inc. (the "Information Agent") and GKN Securities Corp. (the "Dealer
Manager") in connection with the Offer. A Unitholder must tender all Units
owned by such Unitholder in order for the tender to be valid.
The Offer will provide Unitholders with an opportunity to liquidate
their investment without the usual transaction costs associated with market
sales. Unitholders may no longer wish to continue with their investment
in the Partnership for a number of reasons, including:
Although not necessarily an indication of value, an Offer price
substantially in excess of recent secondary market trades for Units
The absence of a formal trading market for the Units
General disenchantment with real estate investments, particularly
long-term investments in limited partnerships
The continuing administrative costs and resultant negative financial
impact on the value of the Partnership's assets due to their ownership
in a publicly registered limited partnership
More immediate use for the cash tied up in an investment in the Units
The delays and complications in preparing and filing personal income tax
returns which may result from an investment in the Units
The opportunity to transfer Units without the costs and commissions
normally associated with a transfer
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 43,756 Units are validly tendered and not withdrawn,
the Purchaser will accept for purchase on a pro rata basis 43,756 Units,
subject to the terms and conditions herein.
As discussed herein, the Purchaser is affiliated with the general
partners of the Partnership and, accordingly, the general partners of the
Partnership have certain conflicts of interest with respect to the Offer.
The Partnership has indicated in its statement on Schedule 14D-9 filed with
the Securities and Exchange Commission (the "Commission") that, because of
such conflicts, it makes no recommendation and is remaining neutral as to
whether a Unitholder should accept the Offer. (See "THE TENDER OFFER -
Section 13. Background of the Offer"; and "Section 10. Conflicts of Interest
and Transactions with Affiliates".)
<PAGE>
The general partner of the Purchaser is DeForest Capital I Corporation,
a newly-formed Delaware corporation ("DeForest Capital") which is affiliated
with NPI Equity Investments II, Inc. ("NPI Equity"), the entity which, on
December 6, 1993, assumed management and obtained control of Fox Capital
Management Corporation ("FCMC") and Fox Realty Investors ("FRI"), the general
partners of Fox Partners II, the general partner of the Partnership
(the "General Partner"). (See "THE TENDER OFFER - Section 13. Background
of the Offer".)
Unitholders who desire liquidity may wish to consider the Offer.
However, each Unitholder must make his or her own decision based upon such
Unitholder's particular circumstances, including the Unitholder's own
financial needs, other investment opportunities and tax position. Each
Unitholder should consult with his or her own advisors, tax, financial or
otherwise, in evaluating the terms of and whether to tender Units pursuant
to the Offer.
The Purchaser has made its own independent analysis in establishing the
Purchase Price. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase Price.
Accordingly, Unitholders are urged to consider carefully all of the information
contained herein before accepting the Offer. (See "THE TENDER OFFER -
Section 13. Background of the Offer".)
According to information supplied by the Partnership, there are 89,292
Units issued and outstanding held by 9,486 Unitholders. The Purchaser does
not directly own any of these Units; however, affiliates of the Purchaser in
the aggregate own 235 Units in the Partnership, constituting approximately
.3% of the Units outstanding.
Certain information contained in this Offer to Purchase which relates to
the Partnership, or represents statements made by the General Partner, has
been derived from information provided to the Purchaser by the General Partner.
Unitholders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding whether to
tender their Units.
<PAGE>
THE TENDER OFFER
Section 1. Terms of the Offer. Upon the terms of the Offer, the
Purchaser will pay for Units validly tendered on or prior to the Expiration
Date and not withdrawn in accordance with Section 4 of this Offer to
Purchase. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on November 18, 1994, unless the Purchaser shall have extended the
period of time for which the Offer is open. In the event the Offer is
extended, the term "Expiration Date" shall mean the latest time and date on
which the Offer, as extended by the Purchaser, shall expire.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant
to the Offer, whether or not such Units were tendered prior to such increase.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser reserves the right (but shall not be obligated), in its sole
discretion, to waive any or all of such conditions. If, on or prior to the
Expiration Date, any or all of such conditions have not been satisfied or
waived, the Purchaser reserves the right to (i) decline to purchase any of
the Units tendered, terminate the Offer and return all tendered Units to
tendering Unitholders, (ii) waive all the unsatisfied conditions and, subject
to complying with applicable rules and regulations of the Commission,
purchase all Units validly tendered, (iii) extend the Offer and, subject to
the right of Unitholders to withdraw Units until the Expiration Date, retain
the Units that have been tendered during the period or periods for which the
Offer is extended, or (iv) amend the Offer.
This Offer to Purchase and the related Letter of Transmittal are being
mailed by the Purchaser to Unitholders or beneficial owners of Units (in the
case of Individual Retirement Accounts and qualified plans) of record as of
October 10, 1994.
Section 2. Proration; Acceptance for Payment and Payment for Units.
If the number of Units validly tendered on or prior to the Expiration Date
and not withdrawn is 43,756 or less, the Purchaser will accept for payment,
subject to the terms and conditions of the Offer, all Units so tendered.
If the number of Units validly tendered on or prior to the Expiration
Date and not withdrawn exceeds 43,756, the Purchaser will accept for payment,
subject to the terms and conditions of the Offer, Units so tendered on a pro
rata basis (with such adjustments to avoid purchase of fractional Units).
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchaser does not expect to announce the final results of proration until at
least ten business days following the Expiration Date. The Purchaser will
not pay for any Units tendered until after the final proration factor has
been determined.
The Purchaser will pay for Units validly tendered and not withdrawn in
accordance with Section 4 as promptly as practicable following the Expiration
Date. In all cases, payment for Units purchased pursuant to the Offer will
be made only after timely receipt by Purchaser of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal. (See "Section 3. Procedures
for Tendering Units".) Under no circumstances will interest be paid on the
purchase price by reason of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal with respect to such Units will be destroyed by the Purchaser.
If for any reason acceptance for payment of, or payment for, any Units
tendered pursuant to the Offer is delayed or the Purchaser is unable to
accept for payment, purchase or pay for Units tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14, the
Purchaser may retain tendered Units, and such Units may not be withdrawn
except to the extent that the tendering Unitholders are entitled to
withdrawal rights as described in Section 4;
<PAGE>
provided, however, that the Purchaser is required, pursuant to Rule 14e-1(c)
under the Exchange Act, to pay Unitholders the Purchase Price in respect of
Units tendered or return such Units promptly after termination or withdrawal
of the Offer.
Section 3. Procedures for Tendering Units.
Valid Tender. To validly tender Units, a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter
of Transmittal, must be received by the Purchaser on or prior to the
Expiration Date. A Unitholder must tender all Units owned by such Unitholder
in order for the tender to be valid.
Signature Requirements. If the Letter of Transmittal is signed by the
registered holder of the Units and payment is to be made directly to that
holder, then no notarization or signature guarantee is required on the Letter
of Transmittal. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust company
having an office, branch or agency in the United States (each an "Eligible
Institution"), no notarization or signature guarantee is required on the
Letter of Transmittal. However, in all other cases, all signatures on the
Letter of Transmittal must either be notarized or guaranteed by an Eligible
Institution.
In order for a tendering Unitholder to participate in the Offer, Units
must be validly tendered and not withdrawn on or prior to the Expiration
Date, which is 5:00 p.m., New York City time, on November 18, 1994.
The method of delivery of the Letter of Transmittal and all other
required documents is at the option and risk of the tendering Unitholder and
delivery will be deemed made only when actually received by the Purchaser.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding with respect to payment
of the purchase price, a tendering Unitholder must provide the Purchaser with
such Unitholder's correct taxpayer identification number by completing the
Substitute Form W-9 included in the Letter of Transmittal. (See the
Instructions to the Letter of Transmittal and "Section 6. Certain Federal
Income Tax Consequences".)
FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each Unitholder must complete
the FIRPTA Affidavit included in the Letter of Transmittal certifying such
Unitholder's taxpayer identification number and address and that the
Unitholder is not a foreign person. (See the Instructions to the Letter of
Transmittal and "Section 6. Certain Federal Income Tax Consequences".)
Other Requirements. By executing a Letter of Transmittal, a tendering
Unitholder irrevocably appoints the designees of the Purchaser as such
Unitholder's proxies, in the manner set forth in the Letter of Transmittal,
each with full power of substitution, to the full extent of such Unitholder's
rights with respect to the Units tendered by such Unitholder and accepted for
payment by the Purchaser. Such appointment will be effective when, and only
to the extent that, the Purchaser accepts such Units for payment. Upon such
acceptance for payment, all prior proxies given by such Unitholder with
respect to such Units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
designees of the Purchaser will, as to such Units, be empowered to exercise
all voting and other rights of such Unitholder as they in their sole
discretion may deem proper at any meeting of Unitholders, by written consent
or otherwise. The Purchaser reserves the right to require that, in order for
Units to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Units, the Purchaser must be able to exercise
full voting rights with respect to such Units, including voting at any
meeting of Unitholders then scheduled.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance for payment of
any tender of Units pursuant to the procedures described above will be
determined by the Purchaser, in its sole discretion, which determination
shall be final and binding. The Purchaser reserves the absolute right to
reject any or all tenders if not in proper form or if the acceptance of, or
payment for, the Units tendered may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the right to waive any
defect or irregularity in any tender with respect to any particular Units of
any particular Unitholder, and the Purchaser's interpretation of the terms
and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Purchaser, the
Information Agent, the Dealer Manager nor any other person will be under any
duty to give notification of any defects or irregularities in the tender of any
Units or will incur any liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Unitholder and the
Purchaser on the terms set forth in the Offer.
Section 4. Withdrawal Rights. Except as otherwise provided in this
Section 4, all tenders of Units pursuant to the Offer are irrevocable,
provided that Units tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date and, unless already accepted for payment
as provided in this Offer to Purchase, may also be withdrawn at any time
after November 18, 1994.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Purchaser at the address set
forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Units to
be withdrawn and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or if
the Purchaser is unable to purchase or pay for Units for any reason, then,
without prejudice to the Purchaser's rights under the Offer, tendered Units
may be retained by the Purchaser and may not be withdrawn except to the
extent that tendering Unitholders are entitled to withdrawal rights as set
forth in this Section 4; provided, however, that the Purchaser is required,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders the
Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
Any Units properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in Section 3 at any time prior to
the Expiration Date.
Section 5. Extension of Tender Period; Termination; Amendment. The
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, (i) to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment
for, any Units, (ii) to terminate the Offer and not accept for payment any
Units not already accepted for payment or paid for, (iii) upon the
occurrence of any of the conditions specified in Section 14, to delay the
acceptance for payment of, or payment for, any Units not already accepted
for payment or paid for, and (iv) to amend the Offer in any respect
(including, without limitation, by increasing the consideration offered,
increasing or decreasing the number of Units being sought, or both). Notice
of any such extension, termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change in compliance with Rule 14d-4(c) under the
Exchange Act. In the case of an extension of the Offer, such extension will
be followed by a press release or public announcement which will be issued no
later than 9:00 a.m., New York City time, on the next business day after the
scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Units) is delayed in its payment for
Units or is unable to pay for Units pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer,
the Purchaser may retain tendered Units and such Units may not be withdrawn
except to the extent tendering Unitholders are entitled to withdrawal rights
as described in Section 4; provided, however, that the Purchaser is required,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders the
Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will extend the Offer and disseminate additional tender
offer materials to the extent required by Rules 14d-4(c) and 14d-6(d) under
the Exchange Act. The minimum period during which an offer must remain open
following a material change in the terms of the offer or information
concerning the offer will depend upon the facts and circumstances, including
the relative materiality of the change in the terms or information. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
securityholders, and if material changes are made with respect to information
that approaches the significance of price or the percentage of securities
sought, a minimum of ten business days may be required to allow for adequate
dissemination to securityholders and for investor response. As used in this
Offer to Purchase, "business day" means any day other than a Saturday, Sunday
or a federal holiday, and consists of the time period from 12:01 a.m. through
12:00 Midnight, New York City time.
Section 6. Certain Federal Income Tax Consequences. The following
summary is a general discussion of certain federal income tax consequences of
a sale of Units pursuant to the Offer. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations thereunder, administrative rulings, practice and procedures and
judicial authority as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing accuracy
of this summary. This summary does not discuss all aspects of federal income
taxation that may be relevant to a particular Unitholder in light of such
Unitholder's specific circumstances or to certain types of Unitholders
subject to special treatment under the federal income tax laws (for example,
foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor does it discuss any aspect of state, local,
foreign or other tax laws. Sales of Units pursuant to the Offer will be
taxable transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws.
EACH UNITHOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unitholder's
"amount realized" on the sale and (ii) the Unitholder's adjusted tax basis
in the Units sold. The amount of a Unitholder's adjusted tax basis in such
Units will vary depending upon such Unitholder's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the
amount of cash received by the Unitholder for the Unit pursuant to the Offer
plus the amount of Partnership liabilities allocable to the Unit (as
determined under Code Section 752).
Based on the results of Partnership operations through December 31, 1993,
it is estimated that, depending on the Unitholder's date of entry into the
Partnership, the taxable gain or loss recognized by a taxable Unitholder who
or which tenders Units that were acquired by such Unitholder at the time of
the Partnership's original offering of Units will range from a gain of $146
per Unit for those admitted in October 1983, to a loss of $50 per Unit for
those admitted in October 1984. It also is estimated that such Unitholder
has "suspended" passive activity losses (i.e., post-1986 net taxable losses
in excess of statutorily provided "phase-in" amounts) from the Partnership of
$344 per Unit (subject to reduction to the extent such Unitholder utilized
any of such losses to offset passive activity income from other investments).
Under the passive activity loss rules, such losses would be deductible by
such Unitholder against his gain, if any, on the sale (subject to any other
applicable limitations). In addition, once the Unitholder sells all his
Units, any suspended passive activity losses from the Partnership in excess
of such Unitholder's gain, if any, on the sale should no longer be subject to
the passive activity loss limitation, and therefore should be deductible by
such Unitholder from his other income subject to any other applicable
limitations. (See the discussion of the passive activity loss limitation
below.)
<PAGE>
The gain or loss recognized by a Unitholder on a sale of a Unit pursuant
to the Offer generally will be treated as a capital gain or loss if the Unit
was held by the Unitholder as a capital asset. Such capital gain or loss
will be treated as long-term capital gain or loss if the tendering
Unitholder's holding period for the Unit exceeds one year. Under current
law, long-term capital gains of individuals and other non-corporate taxpayers
are taxed at a maximum marginal federal income tax rate of 28%, whereas the
maximum marginal federal income tax rate for other income of such persons is
39.6%. Capital losses are deductible only to the extent of capital gains,
except that non-corporate taxpayers may deduct up to $3,000 of capital losses
in excess of the amount of their capital gains against ordinary income.
Excess capital losses generally can be carried forward to succeeding years
(a corporation's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); in addition,
corporations are allowed to carry back excess capital losses to the three
preceding taxable years.
If any portion of the amount realized by a Unitholder is attributable to
"unrealized receivables" (which includes depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Unitholder's gain or loss may be ordinary rather than capital.
It is possible that the basis allocation rules of Code Section 751 may result
in a Unitholder's recognizing ordinary income with respect to such items
while recognizing a larger capital loss with respect to the remainder of the
Unit, even though such Unitholder has an overall loss on the sale.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
A loss recognized by a Unitholder upon a sale of a Unit pursuant to the Offer
can be currently deducted (subject to other applicable limitations) to the
extent of such Unitholder's taxable income from the Partnership for that
year, and gain recognized by a Unitholder upon such sale can be offset by
such Unitholder's passive activity losses (if any) from the Partnership. If
a Unitholder disposes of all his Units pursuant to the Offer, such Unitholder
generally will be able to deduct his remaining passive activity losses (if
any) from the Partnership that could not previously be deducted by such
Unitholder due to the foregoing limitation.
A tendering Unitholder will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Partnership Agreement of
the Partnership (the "Partnership Agreement") concerning transfers of Units.
Such allocation and any cash distributed by the Partnership to such
Unitholder for such year will affect the Unitholder's adjusted tax basis in
Units and, therefore, the amount of such Unitholder's taxable gain or loss
upon a sale of Units pursuant to the Offer.
A taxable Unitholder (other than corporations and certain foreign individua
ls) who tenders Units may be subject to 31% backup withholding unless the
Unitholder provides a taxpayer identification number ("TIN") and certifies
that the TIN is correct or properly certifies that he is awaiting a TIN. A
Unitholder may avoid backup withholding by properly completing and signing
the Substitute Form W-9 included as part of the Letter of Transmittal. If a
Unitholder who is subject to backup withholding does not properly complete
and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Unitholder.
Gain realized by a foreign Unitholder on a sale of a Unit pursuant to
the Offer will be subject to federal income tax. Under Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of the amount
realized by a tendering Unitholder unless the Unitholder properly completes
and signs the FIRPTA Affidavit included as part of the Letter of Transmittal
certifying the Unitholder's TIN, that such Unitholder is not a foreign person
and the Unitholder's address. Amounts withheld would be creditable against a
foreign Unitholder's federal income tax liability and, if in excess thereof,
a refund could be obtained from the Internal Revenue Service by filing a U.S.
income tax return.
<PAGE>
Section 7. Effects of the Offer.
Limitations on Resales. Pursuant to authority contained in the Partnership
Agreement, the General Partner restricts transfers of Units if a transfer,
when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for federal
or applicable state income tax purposes (which termination may occur when
more than 50% of the Units are transferred in a twelve-month period).
Consequently, sales of Units on the secondary market in private transactions
for the twelve-month period following completion of the Offer may be limited.
The Partnership will not process any requests for recognition of substitution
of Unitholders upon a transfer of Units during such twelve-month period which
the General Partner believes may cause a tax termination. In determining the
number of Units for which the Offer to Purchase is made
(representing approximately 49% of the outstanding Units if 43,756 Units are
tendered), the Purchaser took this restriction into account so as to permit
normal historical levels of transfers to occur without violating this
restriction.
Effect on Trading Market. There is no established public trading market
for the Units and, therefore, a reduction in the number of Unitholders should
not materially further restrict the Unitholders' ability to find purchasers
for their Units. (See "Section 13. Background of the Offer - Establishment
of the Purchase Price" for certain limited information regarding recent
secondary sales of the Units.)
Control of all Unitholder Voting Decisions by Purchaser; Effect of
Affiliation with General Partner. The Purchaser will have the right to vote
each Unit purchased. As a result, the Purchaser could be in a position to
significantly influence all voting decisions with respect to the Partnership.
This could (i) prevent non-tendering Unitholders from taking action they
desire but that the Purchaser opposes and (ii) enable the Purchaser to take
action desired by the Purchaser but opposed by non-tendering Unitholders.
Under the Partnership Agreement, Unitholders holding a majority of the Units
are entitled to take action with respect to a variety of matters. When
voting on such matters, the Purchaser will vote the Units acquired pursuant
to the Offer in its interest, which, because of its affiliation with the
General Partner, will also likely be in the interest of the General Partner.
However, the Purchaser agrees, for the benefit of non-tendering Unitholders,
that it will vote its Units in proportion to the votes cast by other
Unitholders on matters put to a vote of Unitholders which propose to change
the fees and other compensation payable by the Partnership to the General
Partner and any of its affiliates. Except for the foregoing, no other
limitations are imposed on the Purchaser's right to vote each Unit purchased.
The Units are registered under the Exchange Act, which requires, among
other things, that the Partnership furnish certain information to its
Unitholders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of, and solicitation of consents from,
Unitholders. Purchase of Units pursuant to the Offer will not result in the
Units becoming eligible for deregistration under the Exchange Act.
Possible Acceleration of Mortgage Debt. A mortgage encumbering the
McMillan Place property, representing approximately $12,938,000 in
outstanding principal amount of indebtedness, contains provisions which
could give the holder thereof the right to accelerate the mortgage debt as a
result of the consummation of the transactions contemplated by the Offer. If
the lender successfully asserts that its mortgage debt may be accelerated,
the Partnership will be required to satisfy the outstanding mortgage debt and
to pay any prepayment fees, expenses or other sums required pursuant to the
terms of the mortgage under such circumstance. In such event, the
Partnership will seek to arrange for alternative sources of mortgage
financing for such property. However, any such refinancings may be at
interest rates which are higher or otherwise on terms which are less
favorable than those provided for by the current mortgage. If the lender is
successful in accelerating its mortgage, the cost of obtaining alternative
financing could have a material adverse effect on the Partnership after
the consummation of the Offer. Furthermore, if alternative financing cannot be
obtained, the lender could foreclose on the property securing its mortgage.
<PAGE>
Section 8. Future Plans. The Purchaser is acquiring the Units pursuant to
the Offer for investment purposes. Subject to the limitation on resales
discussed in Section 7, following the completion of the Offer, the Purchaser
may acquire additional Units. Any such acquisition may be made through
private purchases, through one or more future tender offers or by any other
means deemed advisable. Any such acquisition may be at a price higher or
lower than the price to be paid for the Units purchased pursuant to the
Offer. Neither the Purchaser nor the General Partner has any present plans or
intentions with respect to a liquidation, sale of assets or, except as
described in "Section 13. Background of the Offer", refinancing of any of
the Partnership's properties. However, the Purchaser believes that consistent
with its fiduciary obligations the General Partner will continue to review
any opportunities such as sales or refinancings and will seek to maximize
returns to investors in the Units. The General Partner's stated intentions
are to manage the Partnership's assets to maximize capital appreciation,
improve property operations and reduce Partnership debt. See "Section 10.
Conflicts of Interest and Transactions with Affiliates" for certain
information concerning the General Partner's potential conflict of interest
with respect to sales or refinancings.
Section 9. Certain Information Concerning the Partnership. The
Partnership was organized on August 6, 1982, under the laws of the State of
California. Its principal executive offices are located at 5665 Northside
Drive, N.W., Suite 370, Atlanta, Georgia 30328. Its telephone number is
(404) 916-9050.
The Partnership's primary business is real estate related operations.
Unitholders are referred to the financial and other information included
in the Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, and the Partnership's Quarterly Report on Form 10-Q for
the six months ended June 30, 1994. Such reports and other documents may be
examined and copies may be obtained from the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, New York, New
York 10048. Copies should be available by mail upon payment of the
Commission's customary charges by writing to the Commission's principal
offices at 450 Fifth Street, N.W., Washington, D.C. 20549.
On September 16, 1994, the Partnership entered into an agreement with
the lender for its McMillan Place property pursuant to which the loan
encumbering this property was refinanced. The loan now matures on September
16, 1999 and the interest rate was reduced to 8.25% per annum. In addition,
the lender required the Partnership to enter into a cash management agreement
which provides, among other things, that upon noncompliance with certain
covenants, the lender will receive any excess cash flow over budgeted
expenses, with such excess cash flow to be applied towards the reduction of
the outstanding loan balance.
Section 10. Conflicts of Interest and Transactions with Affiliates.
The General Partner, the Purchaser and their affiliates have conflicts of
interest with respect to the Offer as set forth below.
Conflicts of Interest With Respect to the Offer. The General Partner
has a conflict of interest with respect to the Offer, including as a result
of its affiliation with the Purchaser. (See "Section 7. Background of the
Offer".)
Voting by the Purchaser. As a result of the Offer, the Purchaser may be
in a position to significantly influence all Partnership decisions on which
Unitholders may vote. However, the Purchaser agrees, for the benefit of
non-tendering Unitholders, that it will vote its Units in proportion to the
votes cast by other Unitholders on matters put to a vote of Unitholders which
propose to change the fees and other compensation payable by the Partnership
to the General Partner and any of its affiliates. (See "Section 7. Effects of
the Offer".)
Repayment of Tender Offer Loan. A loan (the "DeForest Loan") may be
obtained by the Purchaser in connection with the Offer. (See "Section 12.
Source of Funds".) The Purchaser plans to service the DeForest Loan with
Purchaser Cash Flow and Tender Cash Flow (as defined in Section 12).
<PAGE>
The amount of the DeForest Loan, and consequently the ability of the
Purchaser to repay such amount, is dependent upon the number of Units
tendered in the DeForest Tender Offers (as defined in Section 12), which
number is not currently ascertainable. One of several possible sources of
Tender Cash Flow is the Purchaser's distributable portion of the proceeds of
any sales or refinancings of Partnership properties attributable to the Units
tendered. Consequently, a conflict of interest may exist for the General
Partner in determining whether and when to sell and/or refinance the
Partnership's properties. Any such conflict, however, may be mitigated by
the fact that (i) proceeds from the sale or refinancing of properties owned
by other partnerships in which the Purchaser or its affiliates may have an
interest may be available to the Purchaser (see "Section 12. Source of
Funds."), (ii) there exist other repayment sources, including capital
contributions from the Purchaser's partners, (iii) certain of the Purchaser's
partners have agreed to loan funds to the Purchaser in order to enable the
Purchaser to make timely interest payments, and (iv) the Purchaser may be
able to refinance all or a portion of the DeForest Loan.
Distributions upon Sales or Refinancings. As mentioned above, one
source of Tender Cash Flow is the Purchaser's distributable portion of the
proceeds of any sales or refinancings of Partnership properties attributable
to the Units tendered. The agreement governing the DeForest Loan will
provide that the Purchaser will be required to make a prepayment on the
DeForest Loan of an amount equal to 60% (100% in the case of a refinancing)
of the Purchaser's distributable portion of the proceeds of such sale or refi
nancing, whether or not distributed by the Partnership. Consequently, unless
the Purchaser otherwise has funds available to make such a required
prepayment, a conflict of interest may exist for the General Partner in
determining whether and when to cause the Partnership to distribute the
proceeds of any such sale or refinancing to the Partnership's partners.
Transactions with Affiliates. The General Partner of the Partnership,
an affiliate of the Purchaser, owns a 2% interest in the Partnership and
thus receives, as a continuing interest in the Partnership, an amount equal
to a 2% allocation of the Partnership's profits and losses, and 2% of
distributions. The General Partner is also entitled to be reimbursed for
certain expenses and to receive certain fees pursuant to the terms of the
Partnership Agreement. For information as to the amounts paid to the General
Partner and its affiliates during the last three fiscal years and the six
months ended June 30, 1994, see Note 2 to the Financial Statements of the
Partnership in the Form 10-K of the Partnership for the fiscal year ended
December 31, 1993 and Note 2 to the Financial Statements of the Partnership
in the Form 10-Q of the Partnership for the six months ended June 30, 1994.
For the period from July 1, 1994 through September 30, 1994, the General
Partner and its affiliates received from the Partnership an aggregate of
approximaately $184,000 with respect to the foregoing interests,
reimbursements and fees.
In February 1994, the Partnership used approximately $437,000 of the
net proceeds from the sale of its Plantation Forest property to pay to NPI
Realty Advisors, Inc. ("NPI Realty"), an affiliate of the Purchaser, the
outstanding balance, including accrued interest, on a loan which had been
made to the Partnership. (See "Section 13. Background of the Offer".)
In connection with NPI Equity's acquisition of management and control of
the Partnership, NPI Equity and certain principals of NPI agreed to indemnify
FRI, FCMC and certain of the former individual general partners of FRI for
25% of the out-of-pocket costs, expenses and liabilities, if any, that may be
incurred by them in connection with the restoration of any deficit balance in
the General Partner's capital account upon the dissolution of the Partnership
subsequent to the sale of all of the Partnership's properties. (See "Section
13. Background of the Offer" for a description of the transaction pursuant to
which NPI Equity acquired control of the Partnership.)
Section 11. Certain Information Concerning the Purchaser. The
Purchaser was organized for the purpose of acquiring the Units. The
principal executive office of the Purchaser and DeForest Capital is at 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328. DeForest Capital
was organized for the purpose of acting as the general partner of the
Purchaser.
<PAGE>
For certain information concerning the directors and executive officers
of DeForest Capital, the general partner of the Purchaser, see Schedule 1 to
this Offer to Purchase.
For certain financial information concerning the Purchaser and DeForest
Capital, see Schedule 2 to this Offer to Purchase.
Except with respect to 235 Units in the aggregate owned by affiliates of
the Purchaser, and except as otherwise set forth herein, (i) neither the
Purchaser, DeForest Capital, to the best of Purchaser's knowledge, the
persons listed on Schedule 1 nor any affiliate of the foregoing beneficially
owns or has a right to acquire any Units, (ii) neither the Purchaser,
DeForest Capital, to the best of Purchaser's knowledge, the persons listed on
Schedule 1, nor any affiliate thereof or director, executive officer or
subsidiary of DeForest Capital has effected any transaction in the Units,
(iii) neither the Purchaser, DeForest Capital, to the best of Purchaser's
knowledge, any of the persons listed on Schedule 1, nor any director or
executive officer of DeForest Capital has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or
voting thereof, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, (iv) there have been no transactions or business relationships which
would be required to be disclosed under the rules and regulations of the
Commission between any of the Purchaser, DeForest Capital or, to the best of
Purchaser's knowledge, the persons listed on Schedule 1, on the one hand, and
the Partnership or its affiliates, on the other hand, and (v) there have been
no contracts, negotiations or transactions between the Purchaser, DeForest
Capital or, to the best of Purchaser's knowledge, the persons listed on
Schedule 1, on the one hand, and the Partnership or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or
other transfer of a material amount of assets.
135 of the Units owned by the Purchaser's affiliates are owned by QAL
Associates, whose address is 100 Jericho Quadrangle, Suite 214, Jericho, New
York 11753, and 100 of such Units are owned by FCMC, whose address is 5665
Northside Drive, Suite 370, Atlanta, Georgia 30328.
Section 12. Source of Funds. The Purchaser expects that approximately
$2,825,000 would be required to purchase 43,756 Units, if tendered, and to
pay related fees and expenses. Purchaser will obtain not less than
$689,000 of such funds from capital contributions from its partners.
The remainder of such funds will be obtained from debt financing to be
provided by Kidder Peabody Mortgage Capital Corporation or an affiliate
thereof (the "Lender") concurrently with the consummation of the Offer
pursuant to the terms of a commitment letter, dated October 11, 1994
(the "Commitment Letter") among the Lender, the Purchaser and the NPI
Purchaser (as defined below).
The Commitment Letter provides for two separate loans (together, the
"Loans"). One loan, the DeForest Loan, will be made to the Purchaser in
order to enable the Purchaser to consummate the Offer as well as to tender
for units of limited partnership interest of eleven other Fox Partnerships
(as defined in Section 13) (together with the Partnership, the "Fox Subject
Partnerships"). The Purchaser commenced such other tender offers
concurrently with the commencement of the Offer (the Offer and such other
tender offers are collectively referred to herein as the "Deforest Tender
Offers"). The second loan (the "DeForest II Loan") will be made to DeForest
Ventures II L.P. (the "NPI Purchaser"), an affiliate of the Purchaser, which
is the offeror in tenders for units of limited partnership interest in seven
limited partnerships (collectively, the "NPI Partnerships"). The NPI
Purchaser commenced such tender offers (the "DeForest II Tender Offers")
concurrently with the commencement of the Offer. The units of limited
partnership interest of the Fox Subject Partnerships which are purchased by
the Purchaser pursuant to the Deforest Tender Offers, and the units of
limited partnership interest of the NPI Partnerships which are purchased by
the NPI Purchaser pursuant to the DeForest II Tender Offers, are collectively
referred to herein as the "Tendered Units". Schedule 3 hereto sets forth
the identity of each other Fox Subject Partnership and each NPI Partnership.
<PAGE>
The maximum aggregate principal amount of the Loans will be $55 million,
of which $36,775,000 has been allocated to the Purchaser for its use in
consummating the DeForest Tender Offers. In no event, however, will the
aggregate principal amount of the Loan made to the Purchaser exceed 80% of
the aggregate purchase price of the Tendered Units to be acquired by it. It
is anticipated that the aggregate maximum purchase price, including related
fees and expenses, will be approximately $48,640,000 for the Tendered Units
in the Fox Subject Partnerships and will be approximately $23,325,000 for
the Tendered Units in the NPI Partnerships. The Purchaser will obtain not
less than approximately $11,900,000 of the anticipated maximum aggregate
purchase price for the Tendered Units in the Fox Subject Partnerships from
capital contributions from its partners, and the NPI Purchaser will obtain
not less than approximately $5,100,000 of the anticipated maximum aggregate
purchase price for the Tendered Units in the NPI Partnerships from capital
contributions from its partners. Accordingly, it is anticipated that not
more than approximately $36,775,000 of such aggregate maximum purchase
price will be borrowed by the Purchaser and not more than approximately
$18,225,000 will be borrowed by the NPI Purchaser. To the extent that the
number of Tendered Units is less than the aggregate number of units of
limited partnership interest sought by the Purchaser and the NPI Purchaser,
the aggregate principal amount of the Loans will be reduced.
The DeForest Loan and the DeForest II Loan will be cross-defaulted and
cross-collateralized. Each Loan will be due and payable one year after
initial funding subject to the right of the borrower to extend such Loan for
two consecutive one-year periods provided that the Loans are not then in
default. Interest on each Loan will accrue monthly and be payable in
arrears at a rate per annum equal to 250 basis points over LIBOR during the
initial 12 months of the Loan, 350 basis points over LIBOR during the second
12 months of the Loan and 450 basis points over LIBOR during the last 12
months of the Loan. As of October 11, 1994 the LIBOR rate was 5.125% per
annum.
The Lender will also be entitled to additional interest on the Loans in
the form of a residual fee. Payment of the Lender's additional interest,
however, is subordinate to the prior return of the aggregate capital
contributions received by the Purchaser and the NPI Purchaser, together with
a 15% per annum return thereon. The residual fee will consist of the greater
of 20% or a specified percentage of Tender Cash Flow until the Lender has
received a 17% per annum rate of return. The specified percentage to be
received by the Lender will be based upon the actual monthly outstanding
balance of the Loans and the period of time during which the Loans were
outstanding, and will continue to be paid to the Lender after its receipt of
a 17% per annum rate of return. The amount of the Loans is dependent upon
the number of Tendered Units acquired. Because such amount and the time of
repayment of the Loans cannot be ascertained at this time, the effective rate
of interest on the Loans cannot be determined. "Tender Cash Flow" is the
amount to be received by the Purchaser with respect to the Tendered Units
acquired by it, whether in the form of distributions from the Fox Subject
Partnerships or as proceeds from the sale or other disposition of such
Tendered Units.
Although the Loans will be prepayable at any time without premium or
penalty, a prepayment is required upon the occurrence of certain events.
The Purchaser will be required to prepay the outstanding principal amount of
the DeForest Loan utilizing Purchaser Cash Flow (as defined herein), if any,
remaining after its application to the payment of interest on the Loans and,
under certain circumstances, to the prepayment of the DeForest II Loan.
Further, whether or not distributed to the Purchaser, 60% of the Purchaser's
distributable portion of the net proceeds of a sale (and 100% of the net
proceeds of a refinancing) of a property owned by a Fox Subject Partnership
is required to be applied in prepayment of the DeForest Loan. (See "Section
10. Conflicts of Interest and Transactions With Affiliates" for a
discussion of certain conflicts of interest which will be created as a result
of the Purchaser's obligation to prepay the DeForest Loan with the proceeds
of sales or refinancings of Partnership properties.) "Purchaser Cash Flow"
means the cash revenues, with certain exceptions, to be received by NPI-AP
Management, L.P. ("NPI-AP Management"), an affiliate of the Purchaser, and by
certain other entities affiliated with National Property Investors, Inc.
("NPI") less allowable operating expenses. Each of NPI-AP Management and
NPI will guarantee the Loans.
As collateral security for the Loans, among other things, the Purchaser
and the NPI Purchaser will be required to pledge and collaterally assign the
Tendered Units to the Lender, and their respective partners will be required
to pledge all partnership interests in the borrowers.
<PAGE>
As additional collateral security, all outstanding shares of the common stock
of NPI Equity (and its parent NPI) and all partnership interests in NPI-AP
Management will be required to be pledged to the Lender by the holders thereof.
The Purchaser and the NPI Purchaser anticipate that the loan
agreement(s) governing the Loans will contain certain customary affirmative
and negative reporting and operational covenants. The borrowers will be
required to pay the Lender reasonable and customary fees in connection with
the Loans and will also be required to indemnify the Lender against certain
liabilities, including liabilities under the Exchange Act. It is also
anticipated that the agreement(s) governing the Loans will provide that
certain actions (i.e., bankruptcy or insolvency and default under mortgage
indebtedness) by Fox Subject Partnerships or NPI Partnerships having in the
aggregate an Attributed Net Value (as defined below) of more than 20% of the
Attributed Net Value of all the Fox Subject Partnerships and the NPI
Partnerships shall constitute a default under the Loans. "Attributed Net
Value" of any Fox Subject Partnership or any NPI Partnership will represent
the purchase price actually paid by the Purchaser or the NPI Purchaser for
Tendered Units of such Partnership multiplied by the number of Tendered Units
actually acquired.
Neither the Purchaser nor the General Partner has any present plans or
intentions with respect to a liquidation, sale of assets or, except as
described in "Section 13. Background of the Offer", refinancing of any of
the Partnership's properties. However, the Purchaser believes that the
General Partner will continue to review opportunities to sell the
Partnership's properties and refinance its indebtedness consistent with its
fiduciary obligations and with a view to maximizing returns to Unit Holders.
The amount of the Loans is dependent upon the number of Tendered Units
to be acquired, which number is not currently ascertainable. If the DeForest
Tender Offers are successful, and the maximum number of Tender Units sought
are acquired, unless properties owned by one or more of the Fox Subject
Partnerships and/or the NPI Partnerships are sold or refinanced, repayment
of the Loans would be dependent upon the ability of the Purchaser or the NPI
Purchaser to obtain replacement financing. (See "Section 10. Conflicts of
Interest and Transactions with Affiliates" for a discussion of certain
conflicts of interest which will be created as a result of the Purchaser
consummating the DeForest Loan.) There are 86 individual properties owned
by the Fox Subject Partnerships and the NPI Partnerships. Except for one
property owned by MRI Business Properties Fund, Ltd. ("MRI"), neither the
Purchaser nor the General Partner is able to identify any specific property
owned by any Fox Subject Partnership or NPI Partnership which is intended to
be sold. MRI has entered into a letter of intent to sell its interests in
the Dallas Marriott Quorum Hotel. It is anticipated that the sale of this
property will be consummated prior to December 31, 1994, and MRI anticipates
receiving net proceeds of approximately $1,500,000 from this sale. There can
be no assurance, however, that the sale of this property will be consummated.
The Purchaser anticipates that, over the course of the Loans or any
refinancing thereof, the allocable share of sale or refinancing proceeds to
be received by it on account of its investment in the Tendered Units,
together with the Purchaser Cash Flow available to service the Loans, will
be sufficient to retire the principal balance of the Loans or any replacement
loans. However, neither the Purchaser nor the NPI Purchaser has made any
plans or arrangements to refinance the Loans.
Section 13. Background of the Offer.
Acquisition of Control. On December 6, 1993, NPI Equity, a wholly-owned
subsidiary of NPI, an affiliate of the Purchaser, assumed management and
obtained control of the General Partner of the Partnership, as well as the
respective general partners of certain other affiliated limited partnerships
(together with the Partnership, the "Fox Partnerships"), by being appointed
as substitute managing partner of FRI, a partner of the General Partner and
the direct or indirect general partner of certain of the other Fox
Partnerships, and by entering into a voting trust agreement with the
beneficial owners of the outstanding shares of stock of FCMC, another partner
of the General Partner and the direct or indirect general partner of certain
of the other Fox Partnerships. Three of the eleven former individual general
partners of FRI are limited partners of the Purchaser.
<PAGE>
In connection with the acquisition by NPI Equity of management and
control of the Partnership and the Fox Partnerships, NPI Realty acquired for
cash and notes an aggregate of approximately $10,800,000 of loans made by FRI
and/or FCMC to the Partnership and the Fox Partnerships (the "Partnership
Advances"), including a $433,091 loan to the Partnership, for the outstanding
balance of such loans. As of the date of this Offer, the Fox Partnerships
have repaid all but $182,000 of the Partnership Advances from, among other
sources, the proceeds of the sales of certain Fox Partnership properties,
including the repayment by the Partnership of the outstanding loan made to
the Partnership from the sale of Plantation Forest.
On October 12, 1994, NPI sold one-third of its stock to an affiliate of
Apollo Real Estate Advisors, L.P. ("Apollo"). (See the Partnership's Form
8-K dated October 12, 1994 for additional information with respect to this
transaction.) Certain individual beneficial owners of NPI and an entity
affiliated with Apollo formed both the Purchaser and DeForest Capital on
September 30, 1994 for the purpose of making the Offer.
Establishment of Purchase Price. The Purchaser has set the Purchase Price
at $60 net per Unit. The Purchaser established the Purchase Price by
analyzing a number of both quantitative and qualitative factors including:
(i) the volume and prices of recent secondary market resales of the Units;
(ii) the lack of liquidity of, and lack of current income derived from, an
investment in the Partnership; (iii) an estimate of the underlying value of
the Partnership's assets; (iv) the costs to the Purchaser associated with
acquiring the Units; and (v) the administrative costs of continuing to own
the Partnership's assets through a publicly registered limited partnership.
Secondary sales activity for the Units has been limited and sporadic.
According to information obtained from trade publications which report on
public real estate limited partnerships, from July 1, 1993 through June 30,
1994, an aggregate of 68 Units were transferred in the secondary market at
prices ranging from $2.00 to $10.00 per Unit. Secondary market sales may not
be an efficient measure of value. However, such sales of Units on the
secondary market and in private transactions are the only current means
available to a Unitholder to liquidate his investment in his Units since the
Units are not listed or traded on any exchange or quoted on any NASDAQ list
or system. Therefore, the Purchaser believes resale prices may be relevant
to establishing the Purchase Price. Based solely on the price range set
forth herein, the Purchase Price is at least 600% of the highest secondary
market sales price during the foregoing period.
The Purchaser is offering to purchase Units which are a relatively
illiquid investment and which do not presently generate current income and is
not offering to purchase the Partnership's underlying assets. Consequently,
the Purchaser does not believe that the underlying asset value of the
Partnership is determinative in arriving at the Purchase Price.
Nevertheless, the Purchaser derived an estimated net value (the "Derived
Value") for the Partnership's assets. In determining the Derived Value,
the Purchaser first calculated the "Adjusted Value" of each of the
Partnership's properties. The Adjusted Value was determined by subtracting
a replacement reserve (the "Replacement Reserve") from a property's earnings
before interest, depreciation and amortization ("EBIDA") for the twelve month
period commencing on July 1, 1993 and ending June 30, 1994, which earnings
were based upon the Partnership's actual operating results. This amount was
then divided by a capitalization rate (the "Cap Rate") to determine the
property's Adjusted Value. The Replacement Reserve used in calculating the
Adjusted Value was $300.00 per apartment unit for those complexes constructed
after 1983 and $400.00 per apartment unit for all other complexes. The Cap
Rate used in calculating the Adjusted Value for the Partnership's apartment
complexes was 9.25% for those complexes constructed after 1983 and 9.75% for
all other complexes. The Adjusted Value of those Partnership properties
which are encumbered by a mortgage which will need to be refinanced prior to
December 31, 1995 was then reduced by an amount equal to 3% of the existing
mortgage debt to account for the costs attendant to such refinancing.
The Purchaser believes that the Replacement Reserve and Cap Rates
utilized by it are within a range of reserves and capitalization rates
currently employed in the marketplace. The utilization of different
replacement reserves and capitalization rates could also be appropriate.
Unitholders should be aware that the use of lower replacement reserves and/or
capitalization rates would result in higher Adjusted Values for the
Partnership's properties.
<PAGE>
The following table applies the method used by the Purchaser to
determine the Adjusted Value.
Property Year Built EBIDA Replacement Cap Adjusted
Reserve Rate Adjustments Value
Wood Lake 1983 $938,000 $88,000 9.75% --- $8,717,949
Wood Ridge 1982 $1,054,000 $112,000 9.75% --- $9,661,538
Sandspoint 1986 $1,178,000 $129,600 9.25% $285,000 $11,049,054
Greenpoint 1986 $1,127,000 $100,800 9.25% $243,000 $10,851,054
Plantation 1980 $ 628,000 $ 72,000 9.75% --- $ 5,702,564
Crossing
Sunrunner 1981 $ 493,000 $ 80,000 9.75% --- $ 4,235,897
McMillan 1985 $1,130,000 $120,600 9.25% --- $10,912,432
Place
Misty 1986 $ 533,000 $ 68,400 9.25% --- $ 5,022,703
To determine the Derived Value of the Partnership's assets, the
Purchaser then added to the aggregate Adjusted Value the net amount of all cash
and cash equivalents of the Partnership at June 30, 1994, less all accounts
payable and other claims against the Partnership which net amount equaled
$1,266,000. Finally, the Adjusted Value of each property was reduced by
subtracting to the extent of such property's Adjusted Value its long term
debt as of June 30, 1994, which reduction amounted to approximately
$56,917,000 in the aggregate. The resulting Derived Value of the
Partnership's assets was approximately $10,502,000 or $115 per Unit (based
upon the percentage of capital distributions to which Unitholders are entitled).
The Purchaser believes that realization by the Partnership of the
Derived Value may be impacted by several factors affecting real estate
assets generally, including: (i) the highly leveraged capital structure of
the Partnership, (ii) the reduced availability of real estate financing,
resulting from various factors including the present condition of financial
institutions, and (iii) the continued sale of properties acquired by
financial institutions and government agencies. No Partnership properties or
assets have been identified for sale, and neither the General Partner nor the
Purchaser has any present plans or intentions with respect to liquidation of
the Partnership. Furthermore, the Purchaser believes that sales of the
Partnership's properties for all cash purchase prices may be affected by the
foregoing factors.
Unitholders should also be aware that, in connection with Apollo's
decision to make an investment in the Purchaser and its affiliates, Apollo
retained an independent third party to conduct an equity analysis of, among
other entities, the Partnership as of June 30, 1994. The foregoing analysis
estimated the equity value of the Partnership at an amount equivalent to
$117 per Unit. However, Unitholders are advised that this valuation was not
prepared with a view toward public disclosure (including disclosure in this
Offer) and that Apollo does not as a matter of course make public its
internal valuations. The fact that Apollo commissioned this evaluation of
the Partnership in connection with its decision to make an investment in the
Purchaser and its affiliates should not be considered as an indication that
either Apollo or the Purchaser considers this valuation as an accurate
indicator of the net amount the Partnership could realize for its assets.
<PAGE>
In establishing the Purchase Price, the Purchaser also took into account
the administrative costs regularly incurred by the Partnership. Because the
Purchaser is offering to purchase Units rather than the underlying assets of
the Partnership, the Purchaser believes it is appropriate to consider such
costs. From information set forth in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, the average
administrative costs of the Partnership for its three prior fiscal years was
$604,000 or $6.76 per outstanding Unit per year. Furthermore, the Purchaser
gave consideration to the costs associated with the acquisition of the Units
of approximately $200,000 or $4.57 per Unit assuming it was able to purchase
all of the Units sought. To the extent less Units are purchased, the
Purchaser's cost per Unit will be proportionately increased.
The Partnership Agreement provides, among other things, that upon
dissolution of the Partnership subsequent to the sale of all of the
Partnership's properties, the General Partner is required to contribute
capital to the Partnership in an amount equal to any deficit then existing
in its capital account. Through ownership of Units by the Purchaser, an
affiliate of the General Partner, the potential liability of the General
Partner and its affiliates would be effectively reduced. Although there was
a deficit in the capital account of the General Partner of $11,317,656 as of
the end of the Partnership's last fiscal year, such amount is subject to future
reduction through allocation of a portion of the taxable gain, if any, that
results from the sale by the Partnership of its properties under the
Partnership Agreement. Consequently, the ultimate amount, if any, of the
deficit and the date on which it would be paid are indeterminable.
Accordingly, the Purchaser has attributed no value to this obligation in
establishing the Purchase Price.
By taking into consideration all of the above factors, the Purchaser
determined the Purchase Price to be $60. The Purchase Price represents the
price at which the Purchaser is willing to purchase Units. No independent
person has been retained to evaluate or render any opinion with respect to
the fairness of the Purchase Price and no representation is made by the
Purchaser or any affiliate of the Purchaser as to such fairness. The
Purchaser did not attempt to obtain current independent valuations or
appraisals of the underlying properties and other assets owned by the
Partnership; however, the Purchaser is aware of the equity analysis referred
to above. As indicated above, the Purchaser does not believe that such
valuations or appraisals should be determinative as to the Purchaser's
establishment of the Purchase Price. Other measures of the value of the
Units may be relevant to Unitholders. Unitholders are urged to consider
carefully all of the information contained herein and consult with their own
advisors, tax, financial or otherwise, in evaluating the terms of the Offer
before deciding whether to tender Units.
Partnership Makes No Recommendation. The Partnership has indicated in
its Statement of Schedule 14D-9 filed with the Commission that it makes no
recommendation and is remaining neutral as to whether Unitholders should
tender their Units pursuant to the Offer because the General Partner of the
Partnership is subject to an inherent conflict of interest resulting from the
General Partner's affiliation with the Purchaser.
Section 14. Conditions of the Offer. Notwithstanding any other term of
the Offer, the Purchaser shall not be required to accept for payment or to
pay for any Units tendered if all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by the Offer shall not have
been filed, occurred or been obtained. Furthermore, notwithstanding any
other term of the Offer, the Purchaser shall not be required to accept for
payment or pay for any Units not theretofore accepted for payment or paid for
and may terminate or amend the Offer as to such Units if, at any time on or
after the date of the Offer and before the acceptance of such Units for
payment or the payment therefor, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays
or otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment of or payment for any Units by the
Purchaser, (ii) imposes or confirms limitations on the ability of the
Purchaser effectively to exercise full rights of ownership of any Units,
including, without limitation, the right to vote any Units acquired by the
Purchaser pursuant to the Offer or otherwise on all matters properly presented
to the Partnership's Unitholders, (iii) requires divestiture by the Purchaser
of any Units, (iv) causes any material diminution of the benefits to be derived
by the Purchaser as a result of the transactions contemplated by the Offer,
or (v) might materially adversely affect the business, properties, assets,
liabilities, financial condition, operations, results of operations or prospects
of the Purchaser or the Partnership;
<PAGE>
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer by any federal or state court, government or
governmental authority or agency, which might, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date hereof, in the business, properties, assets, liabilities,
financial condition, operations, results of operations or prospects of the
Partnership, which, in the sole judgment of the Purchaser, is or may be
materially adverse to the Partnership, or the Purchaser shall have become
aware of any fact that, in the sole judgment of the Purchaser, does or may
have a material adverse effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or
other event which might affect, the extension of credit by lending
institutions or result in any imposition of currency controls in the United
States, (iv) a commencement of a war or armed hostilities or other national
or international calamity directly or indirectly involving the United States,
(v) a material change in United States or other currency exchange rates or a
suspension of a limitation on the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a mater
ial acceleration or worsening thereof;
(e) it shall have been publicly disclosed or the Purchaser shall have
otherwise learned that (i) more than ten percent of the outstanding Units
have been or are proposed to be acquired by another person (including a
"group" within the meaning of Section 13(d)(3) of the Exchange Act), or (ii)
any person or group that prior to such date had filed a Statement with the
Commission pursuant to Section 13(d) or (g) of the Exchange Act has increased
or proposes to increase the number of Units beneficially owned by such person
or group as disclosed in such Statement by two percent or more of the out
standing Units; or
(f) the transactions contemplated by the Commitment Letter shall not have
been consummated.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise
to such conditions or may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion. Any determination by
the Purchaser concerning the events described above will be final and binding
upon all parties.
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the Purchaser is not
aware of any filings, approvals or other actions by any domestic or foreign
governmental or administrative agency that would be required prior to the
acquisition of Units by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, it is the Purchaser's present intention
that such additional approval or action would be sought. While there is no
present intent to delay the purchase of Units tendered pursuant to the Offer
pending receipt of any such additional approval or the taking of any such
action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the Partnership's business, or that
certain parts of the Partnership's business might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or action, any of which could cause the Purchaser to
elect to terminate the Offer without purchasing Units thereunder. The
Purchaser's obligation to purchase and pay for Units is subject to certain
conditions, including conditions related to the legal matters discussed in
this Section 15.
<PAGE>
Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the
acquisition of Units contemplated by the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which
have substantial assets, securityholders, principal executive offices or
principal places of business therein. Although the Purchaser has not
attempted to comply with any state anti-takeover statutes in connection with
the Offer, the Purchaser reserves the right to challenge the validity or
applicability of any state law allegedly applicable to the Offer and nothing
in this Offer to Purchase nor any action taken in connection herewith is
intended as a waiver of such right. If any state anti-takeover statute is
applicable to the Offer, the Purchaser might be unable to accept for payment
or purchase Units tendered pursuant to the Offer or be delayed in continuing
or consummating the Offer. In such case, the Purchaser may not be obligated
to accept for purchase or pay for any Units tendered.
Section 16. Fees and Expenses. Except as set forth in this Section 16,
the Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. The
Purchaser has retained The Herman Group, Inc. to act as Information Agent,
and GKN Securities Corp. to act as Dealer Manager, in connection with the
Offer. The Purchaser will pay the Information Agent and Dealer Manager
reasonable and customary compensation for their respective services in
connection with the Offer, plus reimbursement for out-of-pocket expenses, and
will indemnify the Information Agent and the Dealer Manager against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. The Purchaser will also pay all costs and
expenses of printing and mailing the Offer.
Section 17. Miscellaneous. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance with
applicable law. If the Purchaser becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If,
after such good faith effort, the Purchaser cannot comply with any such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Units residing in such jurisdiction. In those
jurisdictions whose securities or blue sky laws require the Offer to be made
by a licensed broker or dealer, the Offer is being made on behalf of the
Purchaser by the Dealer Manager.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the
Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Schedule 14D-1, pursuant
to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. The
Schedule 14D-1 and any amendments thereto, including exhibits, may be
inspected and copies may be obtained at the same places and in the same
manner as set forth in Section 9 hereof (except that they will not be
available at the regional offices of the Commission).
DEFOREST VENTURES I L.P.
October 17, 1994
<PAGE>
Schedule 1
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
director and executive officer of DeForest Capital. Except for
Mr. Koenigsberger, who is a citizen of Guatemala, each person listed below is a
citizen of the United States.
Present Principal Occupation or Employment;
Material Occupation, Position, Office
or Employment during the Past Five Years
Michael L. Ashner. Since October 1994, Mr. Ashner has been a Director,
President and Co-Chairman of DeForest Capital and DeForest Capital II
Corporation ("DeForest Capital II"), the general partner of the NPI
Purchaser. Since June 1994, Mr. Ashner has been a Director, President and
Co-Chairman of NPI, and since December 1984 has been a Director and President
of NPI Equity. Mr. Ashner has also been a Director and executive officer of
NPI Property Management Corporation ("NPI Management"), the general partner
of NPI-AP Management, L.P., since April 1984, and is currently NPI
Management's Chairman. Since 1981, Mr. Ashner has also served as President
of Exeter Capital Corporation, a firm which has organized and administered
real estate limited partnerships. Mr. Ashner's business address is 100
Jericho Quadrangle, Suite 214, Jericho, New York 11753.
Martin Lifton. Since October 1994, Mr. Lifton has been a Director and
Chairman of DeForest Capital and DeForest Capital II, and since June 1994 has
been a Director and Chairman of NPI. Since November 1991, Mr. Lifton has
been a Director and executive officer of NPI Equity, and is currently NPI
Equity's Chairman. Mr. Lifton has also been a Director and/or executive
officer of NPI Management since November 1991, and is currently a Director
and NPI Management's Co-Chairman. Mr. Lifton has also served as Chairman and
President of The Lifton Company, a real estate investment firm, since January
1985, and as Chairman of The Bank of Great Neck, a Great Neck, New York bank,
since March 1986. Mr. Lifton's business address is 100 Jericho Quadrangle,
Suite 214, Jericho, New York 11753.
W. Edward Scheetz. Mr. Scheetz has been a Director of DeForest Capital,
DeForest Capital II, NPI and NPI Equity since October 1994. Since May 1993,
Mr. Scheetz has been a limited partner of Apollo Real Estate Advisors, L.P.
("Apollo"), the managing general partner of Apollo Real Estate Investment
Fund, L.P., a private investment fund. Mr. Scheetz has also served as a
Director of Roland International, Inc. ("Roland"), a real estate investment
company, since January 1994, and as a Director of Capital Apartment
Properties, Inc., a multi-family residential real estate investment trust,
since January 1994. From 1989 to May 1993, Mr. Scheetz was a principal of
Trammell Crow Ventures, a national real estate investment firm. Mr. Scheetz'
business address is 1301 Avenue of the Americas, 38th floor, New York,
New York 10019.
Ricardo Koenigsberger. Mr. Koenigsberger has been a Director of DeForest
Capital, DeForest Capital II, NPI and NPI Equity since October 1994. Since
October 1990, Mr. Koenigsberger has been an associate of Apollo and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. For
more than one year prior thereto, Mr. Koenigsberger was an associate with
Drexel Burnham Lambert Incorporated. Mr. Koenigsberger's business address is
1301 Avenue of the Americas, 38th floor, New York, New York 10019.
<PAGE>
Arthur N. Queler. Mr. Queler has been a Director, Executive Vice
President, Secretary and Treasurer of DeForest Capital and DeForest Capital
II since October 1994, and of NPI since June 1994. Mr. Queler has been a
Director and executive officer of NPI Equity and NPI Management since
December 1984 and April 1984, respectively. Mr. Queler has also served as
President of ANQ Securities, Inc., a NASD registered broker-dealer firm which
has been responsible for supervision of licensed brokers and coordination
with a nationwide broker-dealer network for the marketing of NPI investment
programs, since 1983. Mr. Queler's business address is 5665 Northside Drive,
N.W., Suite 370, Atlanta, Georgia 30328.
Lee Neibart. Mr. Neibart has been a Director of DeForest Capital,
DeForest Capital II, NPI and NPI Equity since October 1994. Mr. Neibart has
also been an associate of Apollo since December 1993. From 1986 to 1993,
Mr. Neibart also served as Executive Vice President of the Robert Martin
Company, a private real estate development and management firm based in
Westchester County, New York, and from 1982 to 1985, Mr. Neibart served as
President of the New York Chapter of the National Association of Industrial
Office Parks, a professional real estate organization. Mr. Neibart's
business address is 1301 Avenue of the Americas, 38th floor, New York,
New York 10019.
G. Bruce Lifton. Since October 1994, Mr. Lifton has been a Director
and Vice President of DeForest Capital and DeForest Capital II. Mr. Lifton
has also been Vice President of NPI and NPI Equity since January 1991 and
November 1991, respectively, and a Director and Vice President of NPI
Management since June 1994. Mr. Lifton has also served as Vice President of
The Lifton Company since September 1986. Mr. Lifton is a son of Martin
Lifton and the brother of Steven Lifton. Mr. Lifton's business address is
5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
Steven Lifton. Mr. Lifton has been a Vice President of DeForest
Capital and DeForest Capital II since October 1994 and of NPI Management
since June 1994. Since June 1994, Mr. Lifton has been a Director and Vice
President of NPI. Mr. Lifton has been Vice President of NPI Equity since
November 1991 and a director since October 1994. Mr. Lifton has also served
as Senior Vice President of The Lifton Company since September 1984 and as a
Director of The Bank of Great Neck since March 1986. Steven Lifton is a son
of Martin Lifton and the brother of G. Bruce Lifton. Mr. Lifton's business
address is 100 Jericho Quadrangle, Suite 214, Jericho, New York 11753.
<PAGE>
Schedule 2
FINANCIAL STATEMENTS OF THE
PURCHASER AND DEFOREST CAPITAL
<PAGE>
Independent Auditors' Report
DeForest Ventures I L.P.
(A Delaware Limited Partnership)
We have audited the accompanying balance sheet of DeForest Ventures
I L.P. (A Delaware Limited Partnership) as of October 12, 1994.
This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Ventures I L.P. (A Delaware Limited Partnership) as of
October 12, 1994 in conformity with generally accepted accounting
principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
<PAGE>
DeFOREST VENTURES I L.P.
(A Delaware Limited Partnership)
Balance Sheet
October 12, 1994
ASSETS
Cash $ 11,900,000
Deferred Costs 1,800,000
Total Assets $ 13,700,000
LIABILITIES AND PARTNERS' EQUITY
Accrued Expenses $ 1,511,000
Due to Affiliate 289,000
Total Current Liabilities 1,800,000
Commitments and Contingencies
Partners' Equity:
General Partner 119,000
Limited Partners 11,781,000
Total Partners' Equity 11,900,000
Total Liabilities and Partners' Equity $ 13,700,000
See Notes to Financial Statement
<PAGE>
DeFOREST VENTURES I L.P.
(A Delaware Limited Partnership)
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Ventures I L.P., a Delaware Limited Partnership
("DeForest"), was formed on September 30, 1994 for the purpose
of acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships"). The general
partner of DeForest is DeForest Capital I Corporation, a
Delaware Corporation ("DeForest Capital"). Shareholders who
control DeForest Capital also control the general partners of
all the Limited Partnerships. The $289,000 due to an
affiliate represents fees and expenses paid by a related party
on behalf of DeForest.
Concurrently with this transaction, DeForest Ventures II L.P.
("DeForest II"), a Delaware Limited Partnership, was formed
for the purpose of acquiring limited partnership units in
various other affiliated limited partnerships.
2. DEFERRED COSTS
Deferred costs consist of fees and expenses related to the
offers to purchase units in the Limited Partnerships. These
costs will be capitalized as part of DeForest's investment
once the purchases are consummated.
3. COMMITMENTS AND CONTINGENCIES
In order to complete the purchase of limited partnership
units, DeForest and DeForest II have received a commitment for
debt financing from Kidder Peabody Mortgage Capital
Corporation for up to $55 million. The financing will be in
the form of two separate loans which will be cross-defaulted
and cross-collateralized. Each loan will be due one year
after initial funding subject to the right to extend such loan
for two consecutive one-year periods provided that the loan is
not then in default. Interest will accrue at a rate per annum
equal to 250 basis points over LIBOR during the initial 12
months of the loan, 350 basis points over LIBOR during the
second 12 months of the loan and 450 basis points over LIBOR
during the last 12 months of the loan. The lender will also
be entitled to additional interest on the loan pursuant to the
terms of the formula set forth in the commitment. It is
anticipated that DeForest and DeForest II will incur a total
of approximately $1,300,000 in fees and expenses relating to
the financing which will be divided between the two entities
based upon the amount of their respective loans.
<PAGE>
Independent Auditors' Report
DeForest Capital I Corporation
We have audited the accompanying balance sheet of DeForest Capital
I Corporation as of October 12, 1994. This financial statement is
the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Capital I Corporation as of October 12, 1994 in conformity
with generally accepted accounting principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
<PAGE>
DeFOREST CAPITAL I CORPORATION.
Balance Sheet
October 12, 1994
ASSETS
Investment in DeForest Ventures I L.P. $ 119,000
STOCKHOLDERS' EQUITY
Capital Stock, Par Value $.01,
7,500 Shares Authorized, 600
issued and outstanding $ 6
Additional Paid in Capital 1,118,994
Notes Receivable from Stockholders (1,000,000)
Total Stockholders' Equity $ 119,000
See Notes to Financial Statement
<PAGE>
DeFOREST CAPITAL I CORPORATION
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Capital I Corporation ("DeForest Capital"), a
Delaware Corporation, was incorporated on September 30, 1994
and will serve as the general partner of DeForest Ventures I
L.P. ("DeForest"). DeForest was formed for the purpose of
acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships").
Shareholders who control DeForest Capital also control the
general partners of all of the Limited Partnerships.
2. STOCKHOLDERS' EQUITY
Shareholders of DeForest Capital have contributed $119,000 in
cash and $1,000,000 in negotiable demand promissory notes.
<PAGE>
Schedule 3
NPI PARTNERSHIPS
National Property Investors II
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
FOX SUBJECT PARTNERSHIPS
Century Properties Fund XII
Century Properties Fund XIII
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Growth Fund XXII
MRI Business Properties Fund, Ltd.
MRI Business Properties Fund, Ltd. II
MRI Business Properties Fund, Ltd. III
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and
duly executed, will be accepted. The Letter of Transmittal and any other
required documents should be sent or delivered by each Unitholder or his
broker, dealer, commercial bank, trust company or other nominee to the
Purchaser at its address set forth below:
DEFOREST VENTURES I L.P.
By Hand, Mail (insured or registered
recommended) or Overnight Delivery:
DeForest Ventures I L.P.
c/o The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
By Facsimile:
(214) 991-4422 or (214) 991-4432
For Telephone Information:
1-800-530-4966
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other tender offer materials may be directed to the Information
Agent at the telephone number and address below. You may also contact the
Dealer Manager or your broker for assistance concerning the Offer. To
confirm delivery of your Letter of Transmittal, please contact the Purchaser.
The Information Agent for the Offer is:
The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
Century Properties Fund XIX
5665 Northside Drive, N.W., Suite 370
Atlanta Georgia 30328
October 17, 1994
Dear Limited Partner:
Enclosed is the Schedule 14D-9 which was filed by the
Partnership with the Securities and Exchange Commission in
connection with the offer by DeForest Ventures I L.P. (the
"Purchaser") to purchase limited partnership units.
The general partner of the Partnership is affiliated with
the Purchaser. Accordingly, the Partnership is making no
recommendation and is remaining neutral as to whether limited
partners should tender their units pursuant to the offer.
Limited partners are advised to carefully read the enclosed
Schedule 14D-9.
Century Properties Fund XIX
2. Transactions with the General Partner and Affiliates
In accordance with the Partnership Agreement, the
Partnership may be charged by the general partners and affiliates
for services provided to the Partnership. From March 1988 to
December 1992 such amounts were assigned pursuant to a services
agreement by the general partner and affiliates to Metric Realty
Services, L.P., which performed partnership management and other
services for the Partnership. On January 1, 1993, Metric
Management, Inc., a company which is not affiliated with the
general partner, commenced providing certain property and
portfolio management services to the Partnership under a new
services agreement. As provided in the new services agreement
effective January 1, 1993, no reimbursements were made to the
general partner and affiliates during 1993. Subsequent to
December 31, 1992, reimbursements were made to Metric Management,
Inc. On December 16, 1993, the services agreement with Metric
Management, Inc. was modified and, as a result thereof, the
Partnership's general partner assumed responsibility for cash
management of the Partnership as of December 23, 1993 and assumed
responsibility for day-to-day management of the Partnership's
affairs, including portfolio management, accounting and investor
relations services as of April 1, 1994. In addition, interest
was charged on borrowings from affiliates of the general partner
to the Partnership. Related party expenses are as follows:
1993 1992 1991
Property management fees................ $ - $ 886,000 $ 878,000
Reimbursement of operational expenses:
Accounting......................... $ - 269,000 269,000
Investor services.................. $ - 66,000 41,000
Professional services.............. - 39,000 44,000
Total................................... $ - $1,260,000 $1,232,000
Interest expense....................... $57,000 $69,000 $26,000
In accordance with the Partnership Agreement, the general
partner received a Partnership management incentive allocation
equal to ten percent of net and taxable income (losses) before
gains on property dispositions. The general partner was also
allocated its two percent continuing interest in the
Partnership's net and taxable income (loss) after the preceding
allocation. The general partner is also allocated gain on
property dispositions to the extent it is entitled to receive
distributions and then 12 percent of remaining gain.
CENTURY PROPERTIES FUND XIX - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Transactions with Related Parties
(a) An affiliate of the Managing General Partner ("MGP")
received reimbursements of administrative expenses
amounting to $57,000 during the six months ended June
30,l 1994. These reimbursements are primarily included
in general and administrative expenses.
(b) NPI Property Management Corporation ("NPI Management"),
an affiliate of MGP, is entitled to receive a
management fee equal to 5% of the annual gross receipts
from certain properties it manages. For the six months
ended June 30, 1994, NPI Management received $223,000.
These fees are included in operating expenses.
(c) Included in operating expenses for the six months ended
June 30, 1994 is $146,00 of insurance premiums, which
were paid to NPI Management under a master insurance
policy arranged for by MGP.
